The Head of Banking and Finance Department of the Nasarawa State University, Prof.
Uche Uwalake, has said that except the federal government heed the Central Bank of Nigeria’s warning on the economy, Nigeria might just be heading into another recession.
In a message to Business Eye via WhatsApp, Uwaleke cautioned that the Apex bank’s warning can only be ignored at the economy’s peril.
The CBN Governor, Godwin Emefiele, had warned while pressing newsmen after the Monetary Policy Committee meeting in Abuja last Tuesday warned that the country risked going back into recession if the federal government fails to implement the 2018 budget.
According to him, the country has been through this road before.
“The events leading to the recent economic recession about which the CBN also issued warnings should serve as a lesson for the government.
“Only some months ago, soon after the recession by mid 2017, the economy appeared set to embark on a journey of sustained positive economic growth especially on the heels of oil price recovery.
“GDP growth rate headed north.
External reserves grew and exchange rate stabilized.
Inflation rate maintained a downward trend amidst a bullish stock market.
As a matter of fact, the Nigerian stock market was rated among the top three in 2017.
“Today, the table is turning for the worse, GDP growth plunged from 2.11 percent in Q4 2017 to 1.95 percent in Q1 2018 and further down to 1.5 percent in Q2 2018.
Worse still, the agric sector which recorded relatively high growth rates in previous years including the period of recession was only able to grow by 1.19 percent in Q2 2018.
“Headline inflation is now witnessing a spike after several months of disinflation with the food index accounting for much of the increase.
“The pressure on external reserves has resumed following a drop from over 48 billion dollars only a few months ago to less than 45 billion dollars.
This development threatens exchange rate stability.
In the light of the above, the Professor of the Capital Market, “The stock market has been in the bearish territory for most part of the year.
A lot of foreign investors have fled the country partly on account of the political tension and economic uncertainty fuelled by the non implementation of the capital component of the 2018 budget.
Against this backdrop, Uwaleke urged the government to pay to the alarm raised by the CBN saying there is need to prioritise the economy over politics at this time by paying closer attention to the ERGP including through the vigorous implementation of the capital components of the 2018 budget.
While acknowledging the growing concerns over increasing government borrowing, he explained that although debt to GDP ratio is still well below International threshold of 56 percent, the high debt service to revenue ratio at over 60 percent is choking out government expenditure on critical infrastructure.
He therefore called for a change of approach by the government with more focus on external borrowings that are concessionary and should be tied to selfliquidating projects in critical sectors of the economy.
“Furthermore, the government should take advantage of the rising oil price to build fiscal buffers.
More effort should be put in place to ramp up oil production including sustained engagements with stakeholders in the Niger Delta region,” he added.